AI shares fall after US inflation report as borrowing concerns grow
CoreWeave, Nebius, Oracle and Dell Technologies lost about $80 billion in combined market value, while the 30-year US yield reached 5.63%.
AI infrastructure shares fall as US rate hike expectations rise
Nebius fell 15.1% and CoreWeave lost 9.5%, while default-insurance costs for some AI companies reached record highs.
Shares of heavily indebted artificial intelligence companies fell on October 14 as growing expectations of higher US interest rates raised concerns about funding the sector's infrastructure expansion. Companies that had benefited from enthusiasm for AI earlier in the year were among the weakest performers in major stock benchmarks.
Neocloud providers Nebius and CoreWeave declined 15.1% and 9.5%, respectively. Data center operators Applied Digital lost 8.8% and IREN fell 9.9%. Oracle shares dropped 7.2%, and most of the company's dollar bonds also fell.
Strong consumer price data increased expectations that the Federal Reserve could deliver a second rate hike as soon as October. Treasury yields rose 3.6 basis points for 10-year debt and 7.2 basis points for two-year debt. Higher rates increase borrowing costs for companies financing data centers and AI chip purchases.
Kim Forrest, chief investment officer at Bokeh Capital Partners, said investors were reassessing whether AI infrastructure spending would produce the anticipated returns. Default-insurance costs for some AI companies, including Oracle and CoreWeave, reached records, according to S&P Global Market Intelligence data.